Labor Cost Modeling

Insights

The Value of Workforce Analytics

Traditional salary surveys help determine pay competitiveness, but offer no insight regarding total payroll costs – the largest expense in most companies. How your people costs compare to market is actually driven by the structure and composition of the organization – not pay levels. We think cost is what Execs are concerned about. Benchmarking with Workforce Analytics provides you with that insight.

What experts say about Workforce Metrics

In today's knowledge economy, an organization’s workforce is its most important asset as well as one of its greatest investments. The management of human capital — the sum of a workforce’s skill, knowledge and experience — is particularly important in a challenging economic environment, as companies push to improve top- and bottom-line performance while aggressively managing costs. Yet in many companies there has been a lack of understanding and visibility into how human capital is managed — a shortage of analytical insights about where investments are made, what form the investments take, their impact, and how best to shift resources and practices.

In a survey by Mercer, for example, CFOs reported that their organizations spent 36 percent of revenue on human expenses, but only 16 percent said they had anything more than a moderate understanding of the return on human capital investment. In a similar study of 3,000 senior managers, executives gave their firms low marks when describing the employee-related data they need for decisions. The gap between the data they needed and actual quality of the data they received, leaders said, was more than 50 percentage points.

Anand K. Chandaranda, Workforce Analytics Consultant, posted a great opinion piece on a recent LinkedIn blog. He asks: "So, how does HR gain its voice at the table? Quite obviously, by being able to say something that people with decision-making power can't ignore, forces action, and makes them want to hear what you have to say next. When it comes to telling a story, particularly a story based on data, a picture may say a thousand words, but... those words have to have a clear and concise meaning, enlighten the audience, and ultimately lead to some sort of action or improvement." He further writes "So, if you happen to be sitting at HR's seat at the table, our industry's seat, for the bneefit of all of us . . . make sure your voice is heard and makes a difference. Continue to bring fresh ideas and the latest research on talent management with yoiu, but make sure you also deliver data-driven insights and provide strategic driven recommendations specific to your industry and your organization's current situation (i.e. not one size-fits-all "best practices"). You want your voice to be heard? Then I suggest keeping this quote from Jim Barksdale (former CEO of Netscape) in mind: "If we have data, let's look at data. If all we have is opinions, let's go with mine". Finally, he adds "Make sure your recommendations generate real value and have measurable impacts (tangible or intangible with quantifiable ROI calculations preferred) on your workforce, your organization, and the KPIs that matter most to your company (i.e., not just HR metrics): metrics like revenue, profits, market share, earnings per share, customer satisfaction/retention, etc."

As I visit with big companies and organizations all over the world, it’s clear that most CEOs realize they need to make some dramatic changes in how they recruit people, align and manage performance, make compensation decisions, and optimize talent.

What’s not so clear to them is how they make that happen. While HR leaders and their teams are supposed to bring alive the cliché that “people are our most valuable asset,” many CEOs are not yet leading the way in giving those HR leaders the tools, authority, and organizational opportunity they need to unlock the value of the organizations’ talent pools.

A majority of companies report no analytical capabilities when it comes to HR, according to a recent study.

A Bersin by Deloitte report found that 86 percent of companies say they have no analytics capabilities in the HR function. Moreover, 67 percent rate themselves as "weak" at using HR data to predict workforce performance and improvement.

"Given the radical shifts in demographics and technology, doubling down on the human capital practices of the past will not be enough to get the job done," said Josh Bersin, principal and founder of Bersin by Deloitte, in a press release. "The research shows that organizations should re-imagine their approach to engaging people and move to re-engineer many of their HR practices."

According to the report, 86 percent of respondents said leadership development was their biggest challenge, followed by retention and engagement (79 percent) and reskilling the HR function (77 percent). What's more, a majority of the respondents in the survey said that their companies were not ready to properly handle these problems.

I think it is fair to say that Workforce Analytics, HR Metrics, and Big Data in HR is firmly on the map now. It is one of the key trends in global HR right now and everybody's taking about it. And with some good reason. But before we become like a deer caught in the headlights (with references to the flashy dashboards, shiny conference stands from cloud based HRIS vendors and glossy brochures from data warehouse providers) let's step back and see how Workforce Analytics actually can add value.

About Comptryx

Our goal is to enhance competitive analysis using Organizational Metrics to perform workforce analysis, and help HR elevate their contribution to their business. Comptryx is transforming traditional survey data into true Business Intelligence.